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Sunday, July 19, 2009

Prosecutors ask for delay in Stanford civil cases

Prosecutors in the Stanford Financial Group criminal cases in Houston today asked that a related civil case in Dallas be delayed, arguing that disclosures in that case could hurt the criminal prosecution.

Justice Department prosecutor Paul Pelletier asked a Dallas judge to stay all discovery proceedings in the Securities and Exchange Commission's civil lawsuit against several Stanford Financial entities, founder R. Allen Stanford, chief financial officer James M. Davis and chief investment officer Laura Pendergest-Holt.

The SEC civil suit and criminal charges both allege a multibillion-dollar fraud operated through a Stanford offshore bank and a Houston brokerage, which are now in court-ordered receivership.

Stanford, Davis and Pendergest-Holt are charged with conspiracy and fraud in criminal cases and prosecutors argue that the more liberal discovery rules in the civil case could “compromise the rights of the government and public to a fair trial in a criminal action.”

In criminal cases, defendants may ask witnesses to confer before trial but can't force them to do so. In civil cases, defendants can subpoena witnesses to be questioned under oath in depositions before trial. Prosecutors argue that disclosures during civil depositions could harm the government's criminal case.

The filing indicates that the SEC lawyers, the receiver appointed to oversee the Stanford financial empire and the lawyer for Davis, who is cooperating with the government and expected to plead guilty, have all agreed to the civil lawsuit stay.

Lawyers for Stanford and Pendergest-Holt oppose any delay in the civil case.

“This is designed to prevent the defendants in the criminal case from obtaining full and fair discovery, including depositions of important witnesses,” said Dick DeGuerin, Stanford's Houston attorney.

In cases where the government files civil and criminal lawsuits against the same parties, it is common for prosecutors to ask that the civil case be stayed. Judicial economy and fairness given the criminal rules are two common arguments.

Judges often agree to stays the civil cases, as was done in civil matters arising from the collapse of Enron Corp., which also spawned numerous criminal cases.

The difference is that the SEC filed its civil fraud suit against Stanford defendants months before the criminal charges. So the civil case is farther along than they usually are when the government asks that they be delayed while criminal charges go forward.

In another matter in the Stanford criminal case, U.S. District Judge David Hittner in Houston told DeGuerin he could file a fee request under seal.

Hittner also denied Allen Stanford's request to move from a Montgomery County jail facility, where federal prisoners awaiting trial are now usually held, to a downtown Houston federal facility, where federal authorities now mostly keep federal prisoners already sentenced.

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